Title

Re-evaluating the effectiveness of inflation targeting

Document Type

Article

Publication Date

5-2018

Publication Title

Journal of Economic Dynamics and Control

DOI

https://doi.org/10.1016/j.jedc.2018.01.045

ISSN

0165-1889

Abstract

This paper estimates the treatment effect of inflation targeting on macroeconomic variables using a semiparametric single index method by taking into account the model misspecification of parametric propensity scores. Our study uses a broader set of preconditions for inflation targeting and macroeconomic outcome variables than the existing literature. The results suggest no significant difference in the inflation level and inflation volatility between targeters and non-targeters after the adoption of inflation targeting. We find that inflation targeting reduces sacrifice ratio and interest rate volatility in the developed economies, and that it enhances fiscal discipline in both the industrial and developing countries.

Comments

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